By Daniel J. Nestlerode, a QBQ! reader
From the January issue of Town and Gown in State College, PA.
The past couple of years have been hard on most investment people. We first had a precipitous decline in stock prices around the world (most mutual funds declined in value also) exposing just how fragile those portfolio values on the monthly statements have come to be. Then in the midst of the greatest decline in stock prices since the Great Depression, we had the rally to end all stock recovery rallies as prices climbed nearly 60 percent through December 10, 2009. This price performance by our major markets gives roller coasters a new challenge. What could be scarier than the investment markets? Perhaps it is the interest rates offered by your bank on your safe and serious money. Current interest rates are next to nothing.
It is easy to get discouraged as both an investment advisor and as an investor working toward financial goals that presume some increase or growth in your accounts. Since 1980, we have been in a market environment where growth was expected and seemed to be logical, rational, and, well, just right. If we go for the guarantees, we get paltry returns, and if we go for the growth, the volatility in the markets really rattles the nerves. With the failure of some of the major banks, investment banks, and brokerage firms coupled with the bailouts and more bailouts, I wonder if even Uncle Sam’s pockets are deep enough to right the economy and return things to “normal.”
I read a number of economic and market observers and it is easy to get discouraged or be misled. Yet my clients are counting on me to get it right and not be blindsided by market developments. Talk about blindsided, I wonder how Bernie Madoff is doing in his new digs. At least he doesn’t have to concern himself with portfolio performance in his new position.
It is at times like these that I go to my bookshelves and pull out a thin little book that I call QBQ, or The Question Behind the Question by John Miller. John is very deft at providing the guidance to allow me to shift my emotions from being upset, offended and outraged at what is going on to just observing what is going on without the “charge” on it. John’s message is one of taking personal responsibility, a message all too often forgotten in our culture today. Then, with my mood under control, I can again regain responsibility and do what I need to do today to protect my clients’ holdings and perhaps make them some money. While Mr. Miller’s counseling doesn’t guarantee the performance of my clients’ portfolios, it does leave me more clear-headed and able to see what is going on and what I should do about it.
What developments are in store for us in 2010? I can only speculate about what might come to be. With my coach in my corner, I know that I will have the tools to see my way through whatever happens as I enter my 45th year of advising people on their investments. Please fasten your seat belts and start reading your copy of QBQ!
Daniel J. Nestlerode is an investment advisor with 45 years of experience in investment markets, is one of the owners of Nestlerode & Loy, Inc., a 72-year-old investment firm in State College, and currently manages $50 million for individuals and institutions.